Optimism Regarding U.S. Economy is Misplaced – Here's Why

“I am amused by the Shadow Weekly Leading Index Project which claimsthe probability of recession is 31%. I think it is much higher….Let’s take a look at why.”>Michael “Mish” Shedlock< (http://globaleconomicanalysis.blogspot.com) Words: 530

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Shedlock goes on to say in edited excerpts from his original article*:

Those numbers do not look good but they are hardly disastrous. Here are some numbers that are disastrous.

Philly Fed Survey

For the second consecutive month the Philly Fed Survey has been solidly in the red.

(click on chart for sharper image)

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The above numbers are nothing short of a disaster.

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of ‐5.8 in May to ‐16.6, its second consecutive negative reading. Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity.

Indexes for new orders and shipments fell 18 and 20 points, respectively.

Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries….

Deficit spending has carried this “recovery” further than I thought it would, but the party is now over. It will be difficult if not impossible to overcome the above set of circumstances regardless of what anyone feels about economic back-tested recession probabilities.

*http://globaleconomicanalysis.blogspot.ca/2012/06/12-reasons-us-recession-has-arrived-or.html (To access the above article please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

“The most important issue in this year’s election is the economy. Unfortunately, this topic has now been “politicized,” which means that you can’t talk about it without being instantly cheered or jeered by fans of each respective political team…[the truth of the matter, however, is that] the economy is much more important than this year’s election or either political team….The first step is getting past the political blame-game and understanding what’s wrong…. Let’s go to the charts.”

The U.S. economic recovery has been weak and the looming fiscal cliff threatens to act as a further drag on the economy. Europe is imploding with the chances of a ‘Grexit’ increasing, and Spain’s economy deteriorating and risking contagion. David Rosenberg looks at the state of the U.S. and global economy via 51 depressing charts.

The deficits aren’t going to stop anytime soon. The debt mountain will keep growing…Obviously, the debt can’t keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things….The only way for the politicians to buy time will be through price inflation, to reduce the real burden of the debt, and whether they admit it or not, inflation is what they will be praying for….[and] the Federal Reserve will hear their prayer. When will the economy reach the wall toward which it is headed? Not soon, I believe, but in the meantime there will be plenty of excitement. [Let me explain what I expect to unfold.] Words: 1833

One of the problems with the debate over the “national debt” is that there’s no generally agreed upon definition of that term. Is it what the federal government owes, or what it owes foreigners, or what the whole country, private and public sector together, owes? Does it include off-balance-sheet items and contingent liabilities? There’s a hundred-trillion dollar gap between lowest and highest on this spectrum, which allows each commentator to confuse the rest of us by picking the measure that best suits their point of view. [Let’s try to decipher the true state of the nation.] Words: 1468

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